Meanwhile, the Indian rupee rose to its highest level against the US dollar in over four months.

'Big-bang' 

Hitesh Agrawal, head of research with Angel Broking, said: "This was the big bang event that investors were looking for.

In depth

Features and analyses on India's general election


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"We expect the government to have greater flexibility to boost economic reform and growth from here on."

The Congress-led alliance won 261 seats in the 543-seat parliament in the month-long elections which ended last week.

To secure a parliamentary majority, Congress leaders were likely to gather support from several smaller parties.

Fund managers expect the markets to surge by another 20 per cent in coming weeks, against a backdrop of better-than-expected fourth quarter corporate earnings.

Manmohan Singh, set for a second term as prime minister, is expected to open India's insurance, retail and banking sectors to greater foreign investment.

Singh shifted the country away from decades of socialist-style policies and towards a more open economy when he was finance minister in the early 1990s.

But over the past five years, many market reforms that Congress backed were blocked by the communists, which remained a strong force in parliament.

In the election results, announced on Saturday, the communists lost more than half their seats.

Naresh Asrani, a markets analyst based in Dubai, told Al Jazeera: "The Congress party is back in power, without the excess luggage of the left party or the communist party.

"So they can take a lot of bold steps going ahead, primarily in labour reforms, the insurance sector and the banking sector."

Meanwhile on Monday, Sri Lankan shares and the rupee surged as the military announced it had defeated Tamil Tiger separatists in a civil war dating back to 1983.

Most Asian and European stock markets slipped on fresh concerns over the US economy.